SEC Faces Deadline for Terra Investor Compensation Plan

The US Securities and Exchange Commission (SEC) faces an Aug. 20 deadline to submit a plan for distributing a $123.1 million fund paid by Jump Crypto subsidiary Tai Mo Shan to investors harmed by Terra's 2022 collapse.

The proposal is expected to determine who qualifies for compensation, how losses will be calculated, whether investors must submit claims, and how eventual payments will be made.

An SEC order issued in February gave staff until Aug. 20 to submit the proposed distribution plan after granting additional time to develop the methodology and coordinate with recoveries stemming from separate Terraform Labs litigation.

The deadline does not mean investors are due to receive money Thursday. Instead, any payout would depend on the distribution framework and subsequent steps required by the regulator.

Tai Mo Shan has already paid the full $123.1 million ordered by the SEC, including $73.45 million in disgorgement, $12.92 million in prejudgment interest and a $36.73 million civil penalty.

The money, plus accrued interest, is being held in a Fair Fund for eventual distribution to eligible investors.

The SEC created the fund after finding that Tai Mo Shan negligently misled investors during TerraUSD's May 2022 depeg and acted as a statutory underwriter for certain Terra LUNA sales. Tai Mo Shan settled without admitting or denying the findings.

Meanwhile, determining how to distribute the money has been complicated by a separate recovery process involving Terraform Labs.

When the financial regulator extended the deadline in February, it said its staff needed additional time to develop the distribution methodology and, where appropriate, coordinate with anticipated distributions from the Terraform litigation.

Terraform creditors are pursuing recoveries through the company's bankruptcy proceedings, where a separate claims process governs losses tied to the collapse.

A claim in that process does not automatically establish eligibility for the Tai Mo Shan fund, leaving the SEC to determine how the two recovery tracks interact and how eligible losses should be calculated.

The distribution plan expected Thursday should provide the first detailed framework for resolving those questions and moving the $123.1 million fund closer to investors.